Economic In"site"

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Friday, November 18, 2011

Throughout history
you can find “middleman” businesses, in fact almost any retail business is in
essence, a middleman business.However,
the concept of the “middleman” business has evolved over the years, and even
more rapidly so over recent years.The
advent of the internet was supposed to eliminate the middle man, but the need
to understand regulations, handle insurance concerns, and segment processes for
the sake of cost has drastically increased their popularity and frequency, and
rapidly expanded their role in ways no one could have seen coming.

A few years ago I got
a call from a small business owner. He
needed me to look over their books and work up some financial statements. When I got there-as with every new client-I
sat down with him for a few minutes so he could explain how his business worked
so I could be more effective in helping him.
He began by saying that they were a maintenance contracting
company. Not really knowing what this
meant, I said "Okay, so you maintain buildings?" This made sense to me, he had a crew of
janitors that maintained office buildings and such in the area right? No. It
turns out that his business was as follows:

Let's say a toilet
gets clogged at a local department store.
Not clogged like it needs a plunger, but clogged like it needs a
plumber. Or maybe a door breaks,
lighting goes out, whatever it is, something breaks. Well the store manager calls a store hotline,
a 1-800 number that goes to a national center for that department store. They file what is essentially a work order on
the telephone with that conversation.
When they get off the phone the operator they were just on with calls a
maintenance division. That maintenance
division then refers to a list based upon your location, and calls a
maintenance company like my new client's that covers that region. This maintenance company then turns around
and finds a plumber local to the department store-or carpenter, or handyman, or
whatever is needed-negotiate a rate based upon the rate they were given.

My head almost spun
as he was wrapping up this explanation.
What had once been as simple as picking up the phone and finding
"Joe the Plumber" in the yellow pages, had apparently turned into at
least four phone calls that involved call centers all across the country and
put at least three people between the person who had the problem, and the
person who was going to fix the problem.
Take 20 years off the participants in this process and they'd just be a
bunch of kids sitting around playing a game of "telephone", which is
what the process basically became, as the number of plumbers, electricians, or
carpenters that eventually showed up often showed up with eh wrong tools, or a
complete misunderstanding of the problem they were about to fix. Additionally, there was no real way for the
maintenance company to meet the contractors they hired, so there was little way
for them to qualify the worker, or the work itself. Often in fact, you'd find that the stores
this particular maintenance management company covered were in parts of the
country that the company wasn't. For
instance this store represented primarily stores in the southeast and Texas.

Add in the mark-up of
10% at every step along the way, and ultimately the department store is paying
an additional 30---40% for a service that is often performed with less
efficiency and effectiveness than if they'd simply had the store manager call a
local guy he or someone else at the store knew to snake the toilet. And do you think these stores just eat those
costs? No, they pass them on to you and
I, the consumers, jacking up prices on us.
Now this sort of thing is almost entirely set up for insurance, fraud,
or legal reasons, and are a great example of the real costs of regulations on
businesses.

This practice of
hiring businesses to streamline simple processes like snaking a drain or fixing
a door handle are mind boggling to say the least. They almost spur one to wonder if companies
like this department store hire these services specifically to create jobs, or
if regulations are set up in such a way to encourage the creation of jobs such
as this. Either way the concept of the
middle man business has morphed into one that is more of a destructive force in
our economy, raising prices on the consumers while in many cases producing no
actual benefit.

Sunday, November 13, 2011

In light of the Republican candidates' debate last night regarding foreign policy, I thought I'd switch gears off economics for today and towards foreign policy. I figured I'd explain how US foreign policy as a whole is really very easy to understand. In fact all you need to do is have gone through grade school at some point in your life. This is because as I'll explain, the US is really just a troubled teenager on the playground that is our planet.

You see many years ago as a small child the United States was abused by their step father (England). One day they decided they'd had enough, found his gun in the box in his closet, and scared him off. America felt great about this, and learning that there was strength in their unity, dedicated themselves to forming the most perfect union of people in history. This is where our troubled boy learns about violence and finds his own strength.

Before long however, the U.S. figured out that the great feeling they had, was more about beating someone up than it was about founding freedom. The freedom was great, but dominating people felt even better to America. Fortunately, they had an entire race to almost completely exterminate in the Native Americans, so settlers went to work at their own version of genocide, driving the natives to small reservations and wiping out most of the population. This was the stage of the troubled boy terrorizing small neighborhood animals. Lighting cats on fire, etc. When the natives weren't enough, Americans shipped in slaves. This is like the boy cruising craig's list for free cats of his own to light on fire.

As America grew, he works to find himself, to figure out who he is. The Civil War happens, the labor movement and women's suffrage, and America begins to meet their neighbors, and make new friends at school, on the playground of planet Earth. They made friends, and they made enemies, but they soon grew bored, and entertained themselves by nearly wiping the Filipino race from the planet, ravaging the Phillipines at the turn of the century. You see, at some point that young boy figures out he's bigger than the other kids on the playground. He thinks "maybe it would be more fun than picking on small animals, to pick on other kids" and he tests out his war machine on the smallest kid he knows.

Over the next 60 years or so, America involved himself in every fight he could find on the playground. Two royal rumble "World Wars", fights against the Koreans and Vietnamese-no matter how ill advised-and generally establishing his place on the playground. He goes through this through about the sixth grade, and then he's off to a middle school for 7th and 8th graders before high school. At his new school are many of his old acquaintances, but there are new people as well. One of those new people is another kid almost as big as America-Russia. The two biggest kids on the playground finally meet.

For several decades the two bullies roamed the school, aware of each other's presence and occasionally passing in the hallways, but primarily doing their work against each other in a covert manner. For this to work America learned they needed friends, and so they found them, in kids like Israel, England, and France. They made friends much more rapidly than Russia, who was a kid that was large and tough-but not very personable, and from the "wrong side of the tracks". The few friends Russia could find were from the same family, the large and sometimes considered crazy "Stan" family.

Eventually the two bullies meet, have a brief fight, and America wins. In truth, Russia's bad habits have essentially destroyed him prior to the fight (he was drunk on vodka when he showed up, so that didn't help either) but a win is a win, and Russia collapses. His friends and helpers suffer as well, as America learns about keeping a country down without declaring war. They perfect this new method of fighting, demolishing a kid by passing rumors about their mother, stealing from their house, and making sure you have plenty of alibi's available when people want to know where you were at the moment of the crime. As they perfect this new method, they turn it on the coke dealers from the neighborhood of "the Middle East".

For a long time America has been hooked on this brand of cocaine known as "oil". It thrives on the drug, and the drug lords in the Middle East sell it at outrageous prices, yet have very little defense against a kid like America, who could easily strike the rich dealers down should it choose to. America picks the least extreme (and richest) of the three dealers-Saudi Arabia-to be friends with, and only occasionally does business with the other dealers-Iraq and Iran. You see America has a dream of building his own pipeline of cocaine. It's found naturally in several parts of him-Texas and Alaska primarily-so his hopes are not a pipedream, so he dreams about his own pipeline.

Throughout the years the US makes significant progress from it's days in Panama/Nicaragua, or the Platt Amendment in Cuba. While what they do today is based on actions like those-taken more than 100 years ago-it's even more perfect, even more "blameless" and cloaked in even more bullshit. You see today America wanders through the hallways of the school looking for kids with stuff in their locker that they want. America has an in with the principal these days (NATO-they pay for him) and so they know they can get away with what they want. They act under the cloak of "spreading democracy", threatening other kids with their previous acts, breaking them down mentally and rebuilding them in America's mold-as America's convert, their submissive. You may think this is hard to swallow, but I'd advise you to Google "Platt Amendment" before you berate me. Then go ahead and berate away, lol.

The US currently wanders the playground of the world with a figurative pack of gum in one hand and a long stick in the other. They hand out sticks of gum to kids willing to be their friends, and hit the others with the stick until they want to be like us. The problem is-we're running out of gum. For years we've been borrowing money from this new kid (China) to buy more gum, to make sure we keep the friends we already have because they can barely stand us, they're just in it for the gum at this point. What happens when we run out of gum and the new kid doesn't want to lend us any more money? This is how simple our foreign policy is these days. I look forward to your thoughts.

Wednesday, November 2, 2011

Recently a lot of local political discussion has been had regarding pensions and retirement. For years a subject in DC has been Social Security and what to do about what is becoming the biggest and most dangerous Ponzi scheme in the history of the world.

Social Security as a Ponzi scheme?

Make no mistake, Social Security really is a Ponzi scheme, I mean it's completely built on the same concept isn't it? A Ponzi scheme for those that aren't up on the details is basically a scheme in which old investors are paid off with the funds new investors put in. So for instance, if I go to Bill and say I need some money for a business, he gives me ten grand. I then use that ten grand to purchase some things that make it look like I'm doing great, and go to John and say "Hey, I need $25,000". He gives me that $25,000. I then pay Bill back say, $15,000 and he's so impressed with the turnaround he tells his friends, who invest and then I pay John back $30,000 who tells his friends who invest and so forth.

Many will tell you Social Security is not a Ponzi scheme at all. The NY Times recently posted an entire debate on the subject, allowing readers to answer with their thoughts. I could go through the argument and give my view of each point, but that's for another day. Today let's just talk about the retirement age, and whether or not it's appropriate where it is, at age 65 over most of the developed world. (In the undeveloped world they don't call you "retired" if you live to age 65, they call you "lucky".)

The Origin of 65 as a Retirement Age, and of Social Security

As this page outlines, the origin of age 65 being the age of retirement dates back to the 1800's, when Otto Von Bismark introduced a social security system to Germany. A little "light at the end of the tunnel" to the common man, never really intended to cost very much as at the time very few Germans-or anyone-survived until the age of 65. You see back then, "developed" countries were very much like "undeveloped" countries are now in that if you reached age 65 they called you "lucky", not one of the many receiving Social Security, but one of the few to live that long, work that hard, and earn what was essentially your pension.

Basically it was the equivalent of setting the age of retirement at 100 today. You see in 1880, life expectancy worldwide was roughly 40 years of age. So in order to earn social security in the days it was created, you had to outlive your co-workers, friends, and relatives by about 25 years-more than half the length of the average life at the time. You could translate this several ways to today's day and age in America, here are a few equivalents to what age 65 meant back then.

Today life expectancy is about 77.5 years. Add 25 years to that, you could receive social security at age 102.5.

25 years is 62.5% of what a typical life lasted in 1880. So, add 62.5% of life onto our current life expectancy and you'd start receiving social security at the ripe old age of 125!

Look, I don't think either of these ages are the appropriate age to start receiving social security or to consider yourself retired. They're clearly way too old, and given that the concept was introduced basically as an unattainable carrot for the average worker, to use it as a base from which to determine what an appropriate age would be now would be...well, inappropriate. However, the age of 65 is clearly killing our country's finances. That fact is undeniable.

Social Security's Current and Projected Costs and Increases in Cost

Social Security accounted for roughly $701 billion in spending in 2010, and projects to account for almost $800 billion in 2011, as outlined here and here. This is more in spending than any other portion of the federal budget other than Medicare/Medicaid. The amount even leaves in the dust the amount spent on defense (roughly $689 billion). With the money spent on Medicare, Medicaid, and Social Security alone you could literally set up two fully functioning governments (at least). It's insane, and as the "baby-boomer" generation begins to collect it's only going to get worse.

Some estimates have the number of "baby-boomers" at about 75 million-or roughly 25% of the current population (based upon 2010 census information). With another 24% of the population under the age of 18, and another 13% over the age of 65 that leaves about 38% (roughly 117 million) of the population holding the bill as baby-boomers begin to retire and collect. They were born at a clip of about 4 million per year, and they'll retire at roughly the same clip (as a point of reference, 2 million retired last year), doubling the current annual totals of retirees and bringing our country to it's knees financially.

At a cost of roughly $13,000 per retiree each year, that means on top of the $701 billion we already spent last year, we'll be adding almost $51 billion annually. The net effect (total added less total subtracted due to deaths) will probably be somewhere in the $25-30 billion a year range (estimating a 2 million annual death rate amongst those 65+). This doesn't adjust for inflation. We simply cannot afford this any longer.

So What Do We Do?

The clear answer is three fold-raise the age of retirement, raise the social security contributions, and cut back on increases in benefits. These things are all easier said than done, but they're necessary. As the Social Security Administration outlines itself, an increase in age of recipient to age 70 would result in a savings of over $67 billion annually by the year 2040 (bear in mind as it's currently structured Social Security WILL go bankrupt in the year 2037). An even more minor increase in age to 67 according to the same report would result in annual savings of more than $23 billion by the year 2022. Carrying that annual savings forward the 15 years to 2037 when Social Security would otherwise go bankrupt would result in a total savings between then and now of roughly $350 billion. Sure that's only half of what we currently spend annually, but combine that with minor increases in contributions and decreases in payouts and you're in business.

What Else Do We Do?

I know just as well as anyone else with half a brain that's ever paid rent, gone shopping, or eaten, that one simply cannot live off of $13,000 per year. However, at some point one has to be charged with looking out for their own interests. Doing something as simple as setting aside $50 per week if you start out as a 22 year old graduate could mean a world of difference when the time comes for retirement. We have to become a country of people capable of and interested in looking out for ourselves, not simply dependent upon the government to fund our lives because medicine as it currently exists allows us to live longer.

Tuesday, November 1, 2011

Wow, so this daily writing hasn't gone as I'd planned. Between work, child, wife, and the thousands of other things I'm constantly trying to do or keep up on, writing in this blog seems to be the one that slips through the cracks most days. I will however consciously work to change that, this I pledge to you, oh loyal reader.

Today I'd like to talk about the 47% of Americans that don't pay income taxes. Recently a great deal of attention has been paid to the 99% of Americans that represent most of the population, but very little of the income and wealth, particularly in comparison to the 1% they've recently declared war on. However, much less attention seems to be paid to the fact that 47% of the people in this country PAY ZERO FEDERAL INCOME TAXES.

Look, this may not be popular-mostly because it indicts almost half the population-but it's fact. Is it a sad fact as it highlights the other fact that this means that 47% of Americans don't make enough money to pay income taxes? Absolutely. Does that make it any less "fact"? Nope, you see in the real world just because something's sad doesn't mean it isn't happening or isn't fact. Additionally, just because something is sad doesn't make it right. Pulling at your heart strings is not a legitimate substitute for logic, it just isn't-although it's often used as one.

I recently saw a clip of a man-a rich man, one who claims to be part of the 1% a great deal of America is currently railing against-who went down to Zuccotti Park with his own sign. That sign read "I am the 1%, Let's talk". He proceeded to engage many demonstrators regarding many of their issues, particularly his income and how much they deserved of it (in higher taxes on millionaires) as well as capitalism in general. At any rate, his visit to the park intrigued me because it forced protesters to justify their talking points, their lines, their generalized positions.

The 99% like to go on about what's fair and what isn't fair. However I have yet to hear why it's fair that this 1% should pay a higher percentage of taxes than the 99% whether they can afford it or not. Look, there are some things that aren't right, there are times when the 99% movement are very right, but this point is not one of them. While those in Zuccotti Park will argue that things aren't fair, let me tell you what's not fair:

47% of people DO NOT PAY FEDERAL INCOME TAXES. Very simply put. They don't. In fact many get kick-backs in the form of earned income credit. So people that pay nothing and get earned income credit which is enabled by the taxes the rich pay are complaining that the rich don't pay enough? I mean really? Look, I know the argument here is "people pay payroll taxes, they pay local taxes, they pay state taxes" and yes, these things are true. What people arguing those points conveniently leave out is that employers MATCH those taxes, and on top of that pay their own taxes, and on top of that investors and owners pay their own personal taxes-in some cases twice!

Only in America-a place that is becoming a country of whiners-is it okay for someone who pays nothing to complain that those who have aren't paying enough. A guy like Peter Schiff, he worked his you know what off to get where he is. He started his company in a one bedroom apartment working 20 hour days-and that's after doing the same thing to work his way through an Ivy league school. He worked that hard only to get to the top and find out what? It's his job to completely support the slacker who dropped out of school in 9th grade? The guy who partied throughout college, earned a 2.0 gpa, and could only get an hourly paying job as a result?

America is the country of opportunity-at least that's what we'd like to be known as-but that doesn't mean that once you work hard to get ahead, finally get ahead, that you're to be dragged back down. That doesn't mean unequal effort should earn you equal rewards. That most certainly doesn't mean that a guy who worked hard to get ahead should be penalized for it with a higher tax rate. It simply doesn't-at least it shouldn't-and it isn't right if you ask me.

Furthermore, the entire concept is detrimental to America and our success both as a whole, and individually. Do you think for a moment that in this day and age if you start taxing the 1% at a 70% rate (yes I heard that rate quoted by people in Zuccotti Park) that they'll continue working? Or that they'll continue working here? Let's over-simplify it for a second to drive my point home: A millionaire makes a million a year. He currently pays 35% of that to the government. He makes this money as a partner in a business, he has 9 other partners, so total they make $10 million a year, and pay $3.5 million in taxes. Now let's say the proposition on the table is to start taxing them at 70%, bringing that total to $7 million annually. Let's also say (again this is for simplicity's sake) that moving their business overseas would cost them an additional 5% in logistics, plus an initial start up cost of putting factories or offices in, etc, etc. Let's say that initial cost is...I don't know, $50 million. While these costs are negatives, let's say the country they're aiming for is...Mexico, where the tax rate for the top earners is 28%, and they're still close enough to America to enjoy visits.

If America has instilled a 70% tax rate on the top earners they'd be paying $7 million in taxes here, vs. a collective $2.8 million in Mexico. Sure the costs of moving would be tough, but amortize that over the life of the factory (let's say...25 years) and you're talking about a savings of $2.2 million annually by this fictitious group of businessmen. Now maybe they won't starve to death on $300,000 a year in take home income each, but they'll do a hell of a lot better on $720,000.

These numbers are far from exact and are inventions of my own, but they illustrate a fact-if you continue to push tax rates up on businesses and the wealthiest individuals in the world, what's to keep them from leaving for greener pastures? Particular in this day and age of travel and globalization? It's not like moving would keep them from selling to the US if they chose to. Hell, the US isn't even the biggest consumer anymore-or at least we soon won't be-with the industrial emergence of both China and India and their billions of people. Couldn't the US cut itself completely out of the picture with policies jacking up tax rates that are already among the highest in the world?

I'd like to hear any one of you justify the concept of a "progressive" tax system (one that taxes the wealthiest few a higher percentage than others) without using the words "because they can afford it" or any variation. I'd also love to hear any defense for the 47% (that's 75 million households) that don't pay a dime to live in what we think of as the greatest country on earth. Because if we charged even just $1 a day (that's less than most individuals spend on coffee daily) to each household (not person, but entire household) to stay here, that's another almost $30 billion in tax income. That's enough to fund a lot of things in this country; 2/3 of homeland security, a good portion of veteran's benefits, many social programs. Think about all the things the 99% go on about, programs that should be instituted but aren't. Then think, $365 a year from you, just $1 a day from your entire household could change some of that. That's not even $1 a person. Let's say you make $30,000 a year with 1-2 kids and therefore don't really pay any income taxes. That's 1.2% of your income that could make some significant change-and you're "shaming" people for not paying 70%? I say, shame on you.

Sunday, October 23, 2011

So it's been a crazy few days in my house, from dealing with a break into our car to my son being sick I've been tied up. For those of you who follow my twitter however, you should know what's coming as I promised Thursday that my post would be dedicated to refuting, point by point, an article written by Kevin Drum, of motherjones.com/politics. This article pushes forward as fact several economic assumptions perpetuated by liberal politicians in an attempt to make the current administration look good. I have no problem with the current administration (except that their "Jobs Bill" will do anything but create jobs) but I'm also not blindly in favor of them, so I'd like to take a look at these statements without a democratic (or republican) tinted set of glasses on... So let's look at these "myths' Mr. Drum tries to expose for us, and see what the real truths are.

Okay so first of all Mr Drum asserts that not only is it a myth that the economic stimulus package of Obama's failed, but that it worked and worked well. This is a fallacy, not only did the stimulus not work on a long term basis-it was never going to, the system simply is no longer constructed for such an idea to work. Did it create a few jobs? Perhaps, but what the stimulus did ultimately, was apply a band-aid where a tourniquet was needed.

The writer supports his claims by citing 1937 and how the infrastructure spending worked then, and also uses the graphic displayed to the right. While this graphic displays a nice bit of "evidence" in favor of Mr. Drum's opinion, it is not fact. In fact, it is pretty much the opposite of fact, it's damn close to a bald-faced lie. Let's address the GDP growth here-and pardon me if I don't cite statistics from 70 years ago in support of my point and instead go with actual numbers. In 2009 according to the Bureau of Economic Analysis and this article, real GDP decreased 2.4% in 2009. Granted the real hard quarter was Obama's first in office, but regardless, this was a direct reaction to the stimulus which was created and passed in his first quarter. Addtionally, Trading Economicsshows the US GDP to be growing this year at only a 1.3% rate.

Furthermore, Joe Biden himself this morning on CNN's "State of the Union" claimed 3 million jobs added by the stimulus package. The huge range of 4.2-11.1 million jobs added should be the indicator-that shows true on both statistics played off as facts here-but the words of the Vice President's own mouth prove it to be inaccurate today. Furthermore, analysts show that there are actually 1.5 million fewer jobs today than when Obama took office. Even if one bill created 3 million jobs, if 4.5 million are lost in other places the 3 million jobs created doesn't really mean much does it?

It drives me nuts to keep hearing people refer back to the 1930's and 1940's and the plans that helped usher us from the Great Depression when they talk about why infrastructure spending and stimulus packages will work to turn this economy around. It's simply not true, when you compare the economies of the 30's and 40's to today's economy you're comparing apples to oranges. Hell, you're practically comparing apples to...I don't know, hamburgers. The two simply are nothing alike. The global economy has changed drastically in the 70 years that have passed since the Great Depression, and with the costs of logistics dropping while regulatory costs and taxes increase exponentially, things simply aren't being made here any longer. Since that remains true, any money spent here sees only a portion stay here, while other dollars go overseas to pay for the construction of the product you've bought. The point is, when you spent on infrastructure in the 30's, the greater portion of that money-if not all of it-was injected into the US economy through spending by construction workers involved in the infrastructure spending. Today only a portion is injected into the economy while the rest goes overseas. That's just the way today's "global village" works.

The second "myth" Mr. Drum tries to uncover is that the United States' debt is not a real problem, just a perceived problem the Republicans are trying to highlight in an effort to trick us all. The only question inspired by this statement? Was Mr. Drum able to type it without laughing? Because I wasn't. Mr. Drum even goes on to say "Apparently the financial markets think we're a pretty good credit risk". Of course that's in lieu of the fact that on August 6 of this year Standard and Poors downgraded the United States' credit rating, and this morning it's being reported by Business Insider that a Bank of America analyst expects the US's credit rating to be downgraded again in the near future. Now I'm no Wall St. banker, but I'm thinking a downgraded credit rating IS NOT a resounding vote of confidence in how much of a credit risk we are.

Mr. Drum furthers defends his position by saying things like "no one turns down free money" and asking if you'd take money if it were offered to you. This is a foolish point, as the saying goes there is no such thing as a free lunch (or free money). He says that as a result of the tax income created by spending 1 trillion, the cost would only be $400 billion. This is faulty. He actually says 60% of what is spent will be generated in tax dollars. Really? I doubt 60% of what is spent even ends up within our borders, let alone being generated as tax revenue. These figures make zero sense (regardless of the fact they were invented-yes invented-by a Berkley economist, they're senseless, baseless, clearly left-leaning, and designed for one purpose: to further a liberal cause. The numbers themselves are almost circular, and Mr. Drum doesn't provide a link to the study, I'll have to find it myself and pick that apart someday.

Mr. Drum's third "myth" is that lower taxes generate growth in the economy. Let's look at this based solely upon logic shall we? Again, let's remember that we're living in a new global economy these days, that logistics and technology these days make it easier and easier to live wherever you want, to produce wherever you want, it costs very little to move people, products, etc. Add in our emerging competition in the far East in India and China as the two countries with the world's largest work forces, and increases in taxes and regulatory costs might not only hurt our economy, it could cripple it, causing companies to move in droves overseas where they could be more profitable. While many hate corporate American these days, corporations bring jobs and bring products, even if they're just jobs in sales or customer service. The huge problem with our current economy is that jobs have been leaving and going overseas-do we really want to push more out of the country? Americans seem so set in the fact that we're the top nation in the world, but really how hard would it be for corporations to turn to India or China, move their headquarters there and essentially recreate the 1900's with a much larger workforce and experience in watching one country (us) fail so they know what NOT to do next time? I'm not saying that's going to happen next week, but what is there to prevent it from happening?

Mr Drum's fourth "myth" is that regulatory uncertainty is clogging the economy. This makes me wonder if Mr. Drum has ever been involved with any business in any way other than as a customer. Let's look at a few things here, starting with Mr. Drum's own chart, shown on the left.

While Mr. Drum is correct that based upon this survey the biggest problem small business owners worry about is poor sales, look at the next two concerns: taxes and regulations/red tape. Combined, 36% of small business owners cited these two issues as their foremost concern, compared to 20% who were worried about sales. Look, concern about potential taxes and regulation aren't as much of a problem as current taxes and regulatory costs are. I've personally seen dozens of businesses that have existed for decades pushed out of business due to these increased costs. Still other companies are reportedly sitting on nearly $2 trillion in cash, kind of waiting to see how things play out and not using that cash to create jobs. So, while I only have a few points written here to point out the inaccuracy of Mr. Drum's points, corporations in America have roughly 1.8 trillion bits of evidence.

Mr. Drum's fifth fact is one that frankly, I'm not ready to refute-or even state whether I think it should be refuted or not-although I suspect I will given the prior points and his defense for this point. He cites Bernarke's printing of money to the recovery from the Great Depression again, comparing apples and frosted donuts, or hamburgers, or whatever highlights the vast difference between our economy now and our economy 70 years ago the best. Comparing these two times does only one thing; highlight the lack of knowledge the writer of this article clearly has regarding real business, the economy, and finance.

I want to take a minute to go back to "myth #1" for a second, and talk about the stimulus. The stimulus was a band-aid, that's all it should have been even designed to be. It basically enabled the government to extend unemployment benefits and further accommodate those unable to find a job. It supported people during this record 40 week average layoff from full time work, but hand in hand with that package needed to come a long term plan, and that plan never came, in fact the opposite happened, things got worse as a result of inaction.

I spent last year working with a concrete company. They were fairly small-about $15-20 million in annual revenue-and depended heavily on government contracts and government projects to operate. After several years of profitability and joyfully seeing Obama's economic stimulus package pass (thinking it was linked to infrastructure spending) the company began to go downhill. Our biggest problem? Job quote turnaround time-in other words the time that elapsed from the minute we started talking about a job until when we started pouring concrete-more than doubled from 6 months to 12. Jobs started drying up, and while we had many jobs lined up, the money from the government to fund those projects simply wasn't there, hadn't been released yet and so we never were able to start them. Eventually after a year of underemployment for the company as a whole, and gradual crumbling through piece by piece lay-offs, the company folded and was forced to lay everyone off and file for bankruptcy. Those that we laid off were able to stay on unemployment longer sure, but they'd have preferred that spending actually happened and that we were able to start working again.

Tuesday, October 18, 2011

night was the second GOP debate in a week and was hosted by CNN in Las Vegas, Nevada. This Republican class of presidential candidates has looked like a one horse race with the occasional challenger, and the challenge for all the candidates not named Romney to move themselves into being considered a "contender". I'll go person by person, sum up some key points, and give you my thoughts on their performance, how they helped or hurt themselves tonight, and what their economics look like in my eyes.

Herman Cain
Cain comes into the debate (somehow) as the new hot ticket in the Republican party, someone people seem to be getting behind who is currently challenging Romney in the surveys. Cain's catchy 9-9-9 plan was immediately attacked (and it should be, it's ridiculous) by every other candidate. Bachmann wanted to drive the point home that the tax could be increased, while others wanted to drive the point home that MIDDLE CLASS AND LOWER CLASS FAMILIES WOULD PAY MORE TAXES. (Whoops, did I hit the caps lock there? Must have been a slip.) Cain's defense? Basically he said "well you should hear how my guys do it". It's insane, this guy really thinks people are going to buy it?
Verbatim:
"The thing that I would encourage people to do, before they...engage in this knee-jerk reaction is read our analysis. It is available at hermancain.com. It was performed by fiscal associates. And all of the claims that are made against it...It is a jobs plan, it is income neutral, it does not raise taxes on those that are making the least....The reason that our plan is being attacked so much is because lobbyists, accountants, politicans don't want to throw out the tax code..." Allow me to translate for you (I'm a business man as well, I speak Cain's language.)
"The thing that I would encourage people to do, before they...engage in this knee-jerk reaction" (what he means here is "yea that's true, but here's a cute saying and then I'm going to say it's not true)
"It was performed by fiscal associates." (what he meant to say here was "some intern in my office said this sounded like a good plan")
"It is a jobs plan" (It's not a jobs plan)
"it is income neutral" (it is, flat tax, except that we'll pay more for products cuz companies pay tons more in tax.)
"It does not raise taxes..." (it does)
"The reason that..." (I've gotta try to discredit anyone that says anything against this real quick)

For the rest of the time Cain continued to throw in cute little sayings with very little factual backup. He admitted this past week that his taxes WOULD increase taxes on lower and middle class families. There is no exception, so no matter what your income is you're taxed. Look, I agree with this concept actually, but still he's saying it's one thing when the truth is another.

I truly can't believe people are getting behind Herman Cain, but they seem to be according to reports. I wonder if channels aren't just bumping the numbers up to try to create the perception of a race, to give Romney some competition. I mean seriously, did they really listen to his idiotic apples and oranges crap? Perry says "you'll pay the state sales tax plus the fed sales tax on purchases" and Cain says "No, apples and oranges" and then later tells Romney "yea, apples are fed tax and state is oranges, and you have to pay both". Are you kidding me people? This cannot really be the guy you're falling for. WAKE UP PEOPLE.

Moving on...Cain is not a serious candidate. This guy will flame out unless people are far more stupid than I give them credit for...crap, this guy might get the nomination.

Newt Gingrich

I have the same thought about Newt in every public interaction with anyone, any debate, anything. He makes GREAT points and is clearly VERY intelligent. The problem is, he's very unlikeable and he can't really change that. At least that's the impression I get. I don't know much about his social policies, but his economic policies and theories make a lot of sense to me.

There's nothing new or exciting about Newt, so his paragraph might be short. He's not going to get the nomination, and may he shouldn't, I don't know but he needs to have a job somewhere high up for one of these other guys. He seems too...crafty to me, I don't know. I feel like he oughta run the CIA or something, I don't know, maybe I've read too many Tom Clancy type books.

Rick Perry

Texas Governor Rick Perry was a candidate many were looking for to separate himself-even if just by partaking a bit more than prior debates-tonight, and while he partook a lot more, he was really batted around pretty badly by Mitt Romney. Romney put him on the ropes pretty early, and just kinda hammered him for a while. At one point early on Perry started with the strategy of yelling over Romney when Romney was hammering him, but it didn't work, Romney just kept beating on him all night.

Perry is basically the male version of Palin. Ultra conservative, not very bright, doesn't really know what he's talking about. He knows a few talking points-primarily surrounding energy-but that's about it. Overall he's a pretty unimpressive candidate. I can't imagine he lasts real long, he can't beat Obama in a debate, on a stage, or any of that. I could see him literally throwing a fit while Obama knocks em dead with a speech. Obama's policies might be terrible, but he's a great motivator and a great speaker. Sometimes issues don't matter so much (sadly).

On the question of children without healthcare Perry oddly sites his own state's serious problem with immigration. Oddly enough his state's immigration problem is due to their own policies and as Romney pointed out several times his state's problem has increased by 60% while California and Florida's problems have not increased at all. When Romney talked about the specific program I actually saw a woman in the crowd with her jaw on the floor. Perry sounded like he was desperately throwing shots with the "hiring an illegal" thing. I mean that's ridiculous, Romney hired a lawn care service. Does anyone think he was ever even home when the lawn care service is doing his lawn? Do you think he's ever seen them? I doubt it.

Romney had some fun with him, saying things like "It's been a tough couple debates for Rick" and "If you want to be President of the United States you have to learn to listen". I think the knock out blow came when Romney said something to the effect of "I don't have a record? You were the campaign manager for Al Gore while a man from Texas ran on the Republican side." Final nail in the coffin of Perry's presidential chances.

Ron Paul

Paul is another candidate that most of us know very well, like Gingrich. He didn't put forth much new tonight (except for cutting all funding to Israel) and he also inspires me to think something similar to what I think of Ginrich: he has great ideas, great thoughts, very sound philosophies, but he's not a good enough public speaker and not charismatic enough to beat Obama (or anyone) in a race. It's unfortunate, I think he'd make a great president with the right VP candidate. Too bad he and Newt differ a great deal on many topics.

I like Ron Paul, but can't see getting the opportunity to vote for him. He spoke very wisely about making the right cuts with great specificity, citing stations and programs that were wastes of money and going so far as to say that cutting that defense spending would increase our safety as it would bring troops home from stations in places like Korea, Germany, and other countries. He also took a strong stance on foreign funding, saying he'd cut ALL foreign aid including all aid to Israel. He went on (sounding like a parent cutting their child off) to explain that our aid enables Israel. I really like a lot of what he had to say, but have some questions about wiping out the department of education or energy although to be fair I don't know what these departments really do.

Michele Bachmann

Okay first of all, Michele Bachmann wore the most ridiculously white jacket, it was like she was a walking neon light. Bachmann has some strong stances, including pledging to build a double walled fence along the entire Mexico border. I feel like there were a few times-specifically regarding immigration-when Michele got short-changed on opportunity. I'm sure it wasn't intentional, but it certainly cost her some points. She had an emotional moment later in the evening, but honestly I don't think that helped her. At least it didn't with me.

I don't think Bachmann can hang in this group. She's got a seriously good resume-former tax attorney, congresswoman, conservative. I've been saying for a while that she'd make a great running mate with Romney, and I'll stick by that. Romney needs legitimacy with conservatives, he can get it with Bachmann. A female VP candidate is sure to draw strong female support as well, it would be a smart play and I think a winning ticket.

Rick Santorum

Santorum clearly came into this debate wanting to make an impression. He made an effort to make his presence known several times, calling out Mitt Romney in the first few minutes of the debate and regularly exceeding his time limits, extending his time on center stage as often as possible.

Santorum rubs me the wrong way with his ultra religious outlook on things. He keeps talking about things like faith and family, and that bothers me. I need a focus on economy, I don't want someone telling me how to run my family, my life, any of that. I feel like this guy would forget about the economy and lead a battle against abortion and gay marriage and that bothers me a great deal.

I don't feel like I heard enough from him on the economy, everything turned into faith and family, or was an attack on someone else it seemed. When he was asked about the housing issues he turned it into an attack on his opposition regarding TARP-Governor Perry specifically. Maybe that's just what I heard given my predisposition to disliking him as discussed above. Either way, I'm moving on, I don't think he's going to be around long anyway.

Mitt Romney

Lastly we have Mitt, the leading candidate for the last 3 years as the Republican candidate coming in and he comes out as the best looking candidate in my mind as well. He won almost every point, logically and systematically defeated anyone that challenged him, embarrassed Governor Perry BADLY and really just knocked every answer out of the park in a personable and agreeable manner. He made some jokes, got some laughs, and was the focus of a great deal of the applause.

Mitt resembles a presidential candidate in every way. He's got the background as both a politician and successful businessman. He's been preparing for this for years, and has clearly been polishing his boxing gloves for debates. I think tonight he really showed that he can put someone away with all the pokes he took at Governor Perry before the knockout Al Gore campaign shot.

Romney is the only candidate with an economic plan that makes sense and isn't insulting (ahem, Herman Cain). I think he could really lead the country to a financial turnaround, and I think his ticket to the presidential race on the GOP ticket is stamped. His religion could be an issue, but I don't know that it's fair for that to be a problem in a country founded based upon freedom of religion.

Overall

Overall I think Romney is the candidate and the only one that can beat-destroy-Obama. Right now my only question is whether he's picked his running mate already with all his preparation or whether he's auditioning his contenders to be that in these debates. This thought trend prompted the following two thoughts:

1) Wouldn't it be crazy if Romney was more prepared than it appears? What if, in all his planning for this presidential race he already picked his VP candidate and it's one of these competitors. What if it's just a design to gain votes for the ticket later on down the road?

2) I wonder if any of these guys/women are thinking that Romney has the thing tied up and as such they're conciously auditioning-even if he's not looking for it-to be his VP selection.

Random thoughts. The two best candidates that aren't Mitt Romney are Newt Gingrich and Ron Paul, and for some reason these guys never get elected. Ron Paul has some of the most popular opinions ("Who in Fannie Mae, Freddie Mac, Wall St have gone to jail..." or talking about cutting foreign spending, bringing soldiers home, keeping everyone he can paying no tax, etc. Maybe he's swinging for the fences, taking his last shot at the presidency anticipating this to be his last run at it? I don't know.

Let me know what you think about the whole thing, any of the candidates, or me below.

Monday, October 17, 2011

I see a lot of one-sided review of the Occupy movement-both ways to be fair. Some people blindly in approval due to their dislike for corporate America, others against for one reason or another. I've seen all the descriptions of the group, watched all the videos-okay maybe not all of them, but a lot-and read as many articles as I could on the movement from all over the nation. From the movement's inception in New York, through their occupation and eventual City Council meeting in LA, to the movement's official entry into what has become my hometown, Providence.

I've seen the brutality of the police, from New York City itself to San Francisco. I've seen the violence of the crowds in Rome, and the desperation of the crowds everywhere else. What I've seen more than anything is citizens fed up with their government that despite numbers, are growing to not only be fed up with their government, but to fear it as well. While the police and protesters have not really crossed paths yet here in Providence, tonight at the General Assembly-and every day since the movement began in Providence-a great deal of fear has been expressed of the police in general, with the very valid point tonight being made that here in Providence, the most dangerous criminals ARE the police.

Regardless of what your stance is on any of the issues-and I've been pretty clear that I disagree with most of the Occupiers regarding the economy-this highlights some very, very sad issues in America that need to be solved. These are problems that have been building for many years, they won't be solved overnight, but they need to be solved in order for this country to continue to exist as we know it.

The biggest problem of all the occupiers seems to be a lack of trust-particularly in government. This is the one consensus amongst the occupiers, whether it's Congress being lobbied and not acting on our behalf, the police brutalizing occupiers, or politicians in general lying to us the people don't trust their government-and why should they? On almost all levels the government has done little to earn our trust. Go to the DMV, you get some miserable clerk who acts like you just kicked her cat and gives you a massive headache. Have anything to say to a representative or senator? Good luck finding one, they're out hosting some fundraiser where the wallets-ahem people-they really care about are. As for the police? Well around here every time you turn your head they've shot, beat, or raped someone else. Hell, there was a faction in Providence that were the drug dealers of the city-and yet anytime you run into a cop they immediately treat you like you're the criminal, no matter who you are.

We haven't even gotten to the bailouts yet, we haven't gotten to the economic downturn, the job loss, the housing crisis, none of that-just the government in general as we've all known it, our whole lives. I mean think about it-who likes going to the DMV? When was the last time you saw a cop and actually felt safer? Your first instinct when you see a cop is to protect yourself-check your speedometer, whatever it is. Your first instinct is not to feel safer, it is to protect yourself from what you instinctively perceive as your enemy. This is just a microcosm of how the government operates as a whole. You-the citizen-are a nuisance to them, you're an annoyance, something they don't want to deal with. Something their job would be perfect without. In some cases you're even a criminal-just because you're not one of them. This is not an atmosphere that breeds trust. This is not an atmosphere that inspires confidence.

The first step governments MUST take is to realize this, to recognize that there is a problem. Maybe there needs to be massive turnover within governmental bodies, maybe there needs to be citizen review boards added for authorities, maybe there need to be many changes, but they all must originate from a trust that the government reaches out to build, for it is them who have failed us. It is they who have violated our trust, it is they we elect into office to represent us, we pay through taxes to protect us, who have abruptly forgotten about us, who treat us as nuisances, as lesser human beings.

Critics of the movement would have you blame the occupiers themselves-and in some cases that may be appropriate, I'll give you that-but in many it's not, and it's unfair to characterize the entire movement as such. Is it the machinist, or the tool makers' fault when they come into work and find the factory has gone bankrupt? When they walk out and realize they're 53 years old, have been working in that same factory their whole lives, and have almost no real options now? That same person has been told their whole career that every week they pay into a pension and they'll have that, but they then find out it's gone, and the Wall St. executive who pissed it all away just walked away from his company with millions, is that his fault as well? Just because a person has become homeless does not make them a bad person, it does not invalidate their opinion, it does not take away from their humanity and who they are as people.

Basically, writers, analysts, politicians, and leaders need to stop looking at this movement and trying to find a way to blame them, to criminalize them, or to demonize them in the same way they need to stop looking across the proverbial "aisle" and doing the same thing to one another. They need to focus on how to get this country back on track, how to win back the trust of the people, and how to move our country past this time in a positive direction before we become what Rome and other places around the world have become already.